Is Ohio's Attorney General More Powerful Than The SEC?

Is Ohio more powerful than Washington? Looking at what each got out of Hank Greenberg and AIG, that's what it looks like.

Yesterday, Ohio AG Richard Cordray announced an agreement to settle claims against Greenberg and other AIG executives and related corporate entities for $115 million on behalf of several public pension funds.

Last week, the SEC settled with Greenberg for just $15 million. Howard Smith coughed up a measly $1.5 million.

"AIG cannot be permitted to defraud investors and other companies who play by the rules. This agreement in principle will help compensate investors - including Ohio pension funds - who were harmed by AIG's misconduct," Cordray said.

We know the SEC agrees. But what's with the tiny total? As we pointed out last week, the SEC didn't really win. The Journal put the $15 million settlement into perspective:

WSJ: More than four years later, the federal government has decided that it cannot even make a civil case for fraud against Mr. Greenberg, never mind a criminal one. The SEC has essentially settled with Mr. Greenberg on the charge that he was the CEO at the time that "material misstatements" in earnings occurred.

Yet even if one accepts the SEC's view of events, it may be a stretch to call them material, as they add up to less than 1% of AIG's net income during the period at issue. The accounting items in the SEC charges, which Mr. Greenberg neither admits nor denies, represent less than 10% of the restatement AIG filed to justify the Greenberg firing demanded by Mr. Spitzer. The impact on retained earnings was roughly $250 million, when AIG's total retained earnings at the time were approaching $70 billion.

The Ohio settlement isn't a one-off, either. Yesterday's settlement is the third multimillion dollar agreement negotiated by the Ohio public pension funds in the AIG case. The AG's office previously announced a $97.5 million settlement with PricewaterhouseCoopersLLP and a $72 million settlement with General Reinsurance Corporation.

And there's more: AG Cordray noted that he will "now focus on preparing the case for trial against the primary defendant, AIG."